Media Agencies Lower Global Ad Spending Forecasts

Media buying agencies Zenith and GroupM have lowered their expectations for global ad spending in 2017 and 2018, due to factors ranging from political uncertainty in the U.K. to slowing growth in China.

WPP's GroupM is expecting 3% global ad growth in 2017, down from the 4.4% it predicted last December.

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Publicis Groupe's Zenith predicts global ad spending will grow 4.0% in 2017, reaching $558 billion by the end of the year, according to the company's new report. That's down slightly from the 4.2% growth it forecast in June.

"Advertising expenditure grew ahead of the wider economy for the third consecutive year in 2016, but we expect it to fall behind over the next three years," Zenith stated in its updated report.

In its latest earnings report, WPP blamed disappointing results and a grim outlook for 2017 on a steeper-than-expected slowdown in global ad spending by packaged-goods firms, among other factors. In its updated ad forecast, the holding company's media agency group also indicated that a reduction in ad spending growth in China is partly to blame for the slowdown. Pivotal Research analyst Brian Wieser highlighted the drop in a note to investors.

GroupM is predicting that ad spending in China will grow by 3.8% in 2017, compared to its previous expectations of 7.8%, according to the company's report. Zenith is predicting 6.9% growth in China, which is up from 6.6% it predicted in June and down from the 7.7% it expected in December, according to Mr. Wieser.

"Multinational CPG names appeared to spend a lot less in China in 2016, but this is only TV and print, and tells us nothing about the migration to digital these advertisers surely make," GroupM said in its report. GroupM's China operation also attributes a slowdown in growth in the region to "a consumer pause, as evidenced by Kantar data; further TV regulation; and digital running out of room as it approaches 60% market share."

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The Chinese economy "is slowing down after years of blistering growth, and the ad market is slowing alongside it," said Zenith in its latest report.

China will still trail the U.S., "the leading contributor of new ad dollars to the global market over the next three years," according to Zenith. "Its growth is slowing as its scale increases," the company stated.

The media agencies also lowered expectations for ad spending in the U.K. while only slightly reducing U.S. growth forecasts. GroupM's growth forecast for the U.K. dropped from an expected 7.2% growth to 4.1%. Zenith had already significantly reduced its predictions for spending in the region in June, but reduced it even more to 0.7% in its latest report, according to Mr. Wieser. The firm attributed the dip to political uncertainty, among other factors.

Each firm has its own methodology, but it's not immediately clear why their forecasts in the U.K. and China are so different.

Zenith expects North American ad spend to grow 3.6% this year, and it's predicting an average of 3.4% growth per year to 2019.